Here’s An Idea: Why Not Reform Medicaid First?

In its efforts to expand access to health insurance, Congress is planning to add millions more people to Medicaid — already the largest health plan in the country. The government has controlled Medicaid for nearly 45 years, and the program has enormous problems with cost, quality, and access. Rather than expanding Medicaid, Congress should start by reforming it — now.

According to some estimates, as many as 40 percent of physicians refuse to see Medicaid patients because of its woefully-low reimbursement rates and administrative hassles. This often forces Medicaid recipients to wait for hours in hospital emergency rooms to receive even routine care.

Medicaid also routinely denies patients access to new and innovative care, and it imposes arbitrary limits on access to medical treatments, including the newest prescription drugs.

In addition, the Government Accountability Office (GAO) says the program is plagued by fraud. In a report this year, the GAO labeled Medicaid as a “high-risk” program, identifying $32.7 billion in improper payments in 2007 alone — 10 percent of the program’s total spending.

If Medicaid were a private plan that had to compete in the market, it would have been driven out of business years ago.

But because it’s a government program, it continues to survive on a continuous flood of more than $320 billion a year in taxpayer dollars, even as recipients are routinely denied access to quality care, including specialists, and suffer inferior health outcomes compared to people with private insurance. Medicaid is a health care ghetto where few recipients have a choice of private health plans that provide meaningful access to physicians.

Today, Medicaid beneficiaries are in the one segment of the market with the fewest choices. Shouldn’t this be where we begin with reform? And how could we think about dramatically expanding this program, as Senate and House proposals would do, without improving it first?

If supporters of health reform are truly serious about wanting more competition and choices in the market, Congress could instead:

· Provide current enrollees in Medicaid the option to cash out the value of their Medicaid coverage and purchase coverage of their choice in an improved and truly competitive market.

· Ensure that they have adequate protections and access to affordable health insurance by giving states incentives to reform their health insurance markets.

· Provide assistance to states in creating a safety net to make sure they could obtain affordable coverage, with premium supplements where needed.

This approach has been embodied in a number of legislative proposals, including ones by senators Mike Enzi, Richard Burr, Tom Coburn, and Judd Gregg.

And in a world where Members of Congress can propose spending nearly $1 trillion to cover some of the uninsured, clearly investing in turning Medicaid into a decent program isn’t too much to ask.

Advocates of statist solutions, however, ignore the long-run potential of this type of transformative change and the potential savings from greater efficiencies. We can modernize Medicaid and save money by:

· Phasing out the $80 billion in misdirected subsidies to hospitals that we currently pay partly to help make up for inadequate Medicaid payments.

· Ending the various schemes perpetrated by the states over the years to manipulate their Medicaid matching rates to draw down hundreds of billions of dollars in extra federal payments used to finance other state programs that have nothing to do with health care.

· Creating new incentives for healthy behaviors which, unlike the current Medicaid structure, would reward patients who better manage their chronic conditions and provide better access to prevention and wellness programs.

Medicaid beneficiaries could have the dignity of private health insurance, and they could vote with their feet, abandoning lower-quality plans and moving into plans that provide better access to higher-quality services at more affordable prices.

Rather than disrupt the private market, this alternative would apply the principles of competition and choice to the program where they are needed most — Medicaid. This alternative could help transform the government-run health program that provides the worst care in America into one that provides quality care for low-income Americans and better value for the taxpayers.

Grace-Marie Turner is president of the Galen Institute and a former member of the Medicaid Commission.

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In its efforts to expand access to health insurance, Congress is planning to add millions more people to Medicaid — already the largest health plan in the country. The government has controlled Medicaid for nearly 45 years, and the program has enormous problems with cost, quality, and access. Rather than expanding Medicaid, Congress should start by reforming it — now.

According to some estimates, as many as 40 percent of physicians refuse to see Medicaid patients because of its woefully-low reimbursement rates and administrative hassles. This often forces Medicaid recipients to wait for hours in hospital emergency rooms to receive even routine care.

Medicaid also routinely denies patients access to new and innovative care, and it imposes arbitrary limits on access to medical treatments, including the newest prescription drugs.

In addition, the Government Accountability Office (GAO) says the program is plagued by fraud. In a report this year, the GAO labeled Medicaid as a “high-risk” program, identifying $32.7 billion in improper payments in 2007 alone — 10 percent of the program’s total spending.

If Medicaid were a private plan that had to compete in the market, it would have been driven out of business years ago.

But because it’s a government program, it continues to survive on a continuous flood of more than $320 billion a year in taxpayer dollars, even as recipients are routinely denied access to quality care, including specialists, and suffer inferior health outcomes compared to people with private insurance. Medicaid is a health care ghetto where few recipients have a choice of private health plans that provide meaningful access to physicians.

Today, Medicaid beneficiaries are in the one segment of the market with the fewest choices. Shouldn’t this be where we begin with reform? And how could we think about dramatically expanding this program, as Senate and House proposals would do, without improving it first?

If supporters of health reform are truly serious about wanting more competition and choices in the market, Congress could instead:

· Provide current enrollees in Medicaid the option to cash out the value of their Medicaid coverage and purchase coverage of their choice in an improved and truly competitive market.

· Ensure that they have adequate protections and access to affordable health insurance by giving states incentives to reform their health insurance markets.

· Provide assistance to states in creating a safety net to make sure they could obtain affordable coverage, with premium supplements where needed.

This approach has been embodied in a number of legislative proposals, including ones by senators Mike Enzi, Richard Burr, Tom Coburn, and Judd Gregg.

And in a world where Members of Congress can propose spending nearly $1 trillion to cover some of the uninsured, clearly investing in turning Medicaid into a decent program isn’t too much to ask.

Advocates of statist solutions, however, ignore the long-run potential of this type of transformative change and the potential savings from greater efficiencies. We can modernize Medicaid and save money by:

· Phasing out the $80 billion in misdirected subsidies to hospitals that we currently pay partly to help make up for inadequate Medicaid payments.

· Ending the various schemes perpetrated by the states over the years to manipulate their Medicaid matching rates to draw down hundreds of billions of dollars in extra federal payments used to finance other state programs that have nothing to do with health care.

· Creating new incentives for healthy behaviors which, unlike the current Medicaid structure, would reward patients who better manage their chronic conditions and provide better access to prevention and wellness programs.

Medicaid beneficiaries could have the dignity of private health insurance, and they could vote with their feet, abandoning lower-quality plans and moving into plans that provide better access to higher-quality services at more affordable prices.

Rather than disrupt the private market, this alternative would apply the principles of competition and choice to the program where they are needed most — Medicaid. This alternative could help transform the government-run health program that provides the worst care in America into one that provides quality care for low-income Americans and better value for the taxpayers.

Grace-Marie Turner is president of the Galen Institute and a former member of the Medicaid Commission.